Farewell, Marcus Welby, M.D.

Once upon a time, doctors made house calls.  If the patient was immobile or too sick to travel, or a hospital was too far away, the doctor would pay a visit to the patient’s house.  That was in the very old days.  Today, we have ambulances, well-equipped hospitals and doctor’s offices, and 911.  Today’s doctors can’t make money traveling to visit their patients, thus the once-quoted saying “I don’t make house calls.”

Those were the days of the soap opera doctors.  Doctor Kildare.  Marcus Welby, M.D.  Handsome surgeons, grandfatherly-wise general practitioners who had the time and patients to listen to their patients, sometime today’s doctors are simply busy to do.

Monday’s Wall Street Journal story, “In Search of More Primary-Care Doctors”, examines the growing shortage of medical school students willing to go in general practice; pediatrics, family medicine, internal medicine.  These fields simply don’t pay.

The average starting salary for a pediatrician is $179,000.  One third-year Harvard Medical student interviewed for the article is a rare doc-to-be who shows interested in the field of primary care.

The article says, “She is convinced that the U.S. is moving toward a health-care system that will put a much higher priority on keeping people healthy and out of the hospital, and that the primary-care doctor will play a leading role in this transformation.”

The problem for medical schools is finding more students like here to train over the next decade.

The Wall Street Journal article states, “The Association of American Medical Colleges, or AAMC, predicts that by 2020, the U.S. will be short more than 45,000 primary-care doctors – those who practice internal medicine, family medicine and pediatrics.  With millions more patients expected to be seeking a doctor because of the Affordable Care Act and 10,000 Americans turning 65 every d ay for the next two decades, demand for these physicians is outstripping the supply.  Yet only about 20 percent of medical residents go into primary care, according to the AAMC.”

Medical schools are trying the community organizing approach, channeling students away from specialized medicine and into community-based primary-care training programs, particularly for underserved communities.  The poor, having no doctor, turn to emergency rooms for simple procedures and treatments a primary care physician or general practitioner could perform.  The hospitals must accept these patients and the taxpayers foot the bill under Medicaid.

Some schools, through Federal grants, pay back student loans to young doctors who agree to practice in rural or underserved urban areas.  A recent study by John Hopkins University shows that with each 1 percent increase in primary-care physicians, an average city will have 503 fewer hospital admissions, 3,000 fewer emergency room visits, and 512 fewer surgeries annually, according to the WSJ.

“Many medical educators and innovators agree that efforts to entice more students into primary care will be fruitless unless there is an increase in the number of federally-supported medical residencies – the three to seven years of on-the-job training that medical school graduates must complete before they can practice independently [and competently].”

However, the bottom line is that the average orthopedic surgeon’s salary (orthopedic) is almost four times that of the pediatrician – $483,000.  No medical student is going to go through 8 additional years of study to bring home the same salary as a mid-level corporate manager.  If the only way to entice them is through taxpayer dollars, not only will we have a problem finding a doctor, we’ll have a problem paying them or finding insurance to cover the cost.

People are having fewer children and so there’s less need for pediatricians.  Unless they’re paid more, they’re not going to enter the profession at all.  Parents, especially poor parents will have no recourse but to turn to the conglomerated hospital systems.

In another article, this on in an article in the Aug. 5th issue of National Review (“An Arm and a Leg:  Hospitals are to blame for obscene health-care costs), columnist Avik S.A. Roy blames the merger of hospitals for the rising cost of health care. 

“In debates about health care,” Roy writes, “we spend a lot of time arguing over how we buy it:  whether through government payers, private insurers, or health savings accounts.  But there’s an equally important story, one that nearly everyone in the political class has neglected:  how we sell health care.  Hospitals are at the center of this story.  And they are using their economic and political power to drive up the price of their product.

“If the Congressional Budget Office’s projections are right, health care will account for almost all increases in government spending for the foreseeable future, excluding interest on the debt.  And increasing spending on hospital care is the biggest driver of rising health-insurance premiums, which are in turn the main cause of wage stagnation for middle-income Americans.  Put simply, we cannot confront the growth of government, nor of middle-class economic insecurity, without first confronting the central role that hospital play in causing both.”

Happily, for the hospitals, they’ve been able to dodge the blame because Democrats, with their anti-Capitalist agenda, blame the evil health insurance companies for the costs.  They’re also the devils who use their prongs to “deny” a hospital’s procedures because they’re too expensive.  Hospitals know people sick enough to need hospital care, especially in emergency, don’t have the time to “shop around”.  Hospitals pretty much charge what they want.

Roy points out that prices for the same procedure can vary widely.  “Private insurers don’t have the same leverage as the government.  If a private insurer refuses to play ball with the major hospital in town, the insurer will lose customers to a competitor who is willing to pay the hospital more…Politicians demonize insurers and lionize hospitals, so insurers will look like the bad guys if they deny their customers access to famous, but costly, local hospitals.”

Roy uses an example of an uninsured lymphoma patient who went to a world-renowned cancer facility.  “The hospital charged him $283 for a chest x0ray for which it would have charged Medicare $20.  It charged him more than $15,000 for blood tests that normally cost a few hundred dollars.  It charged him $13,702 for a…lymphoma drug for which the average U.S. hospital price is around $4,000.  All told, [the patient’s] course of treatment cost $83,900.  Whatever he couldn’t pay was called ‘uncompensated care.’

Roy notes that the hospital “is not struggling under the weight of bills unpaid by the uninsured.  In 2010, it recorded revenue of $2.05 billion and operating profits of $531 million.”

“In May,” he continues, “for the first time, the Centers of Medicare and Medicaid Services released data on the prices that hospitals charge for common medical procedures.  They found wide discrepancies.  Jackson Memorial Hospital in Miami, for example, listed an average price of $66,030 for implanting a pacemaker.  The University of Miami Hospital across the street listed an average price of $127,038.  In some cases, the costliest hospital charged five or six times what the cheapest hospital did.  Hospital prices are usually set arbitrarily.  They have no relationship to what the services cost to provide, or to what insurance companies and the uninsured actually pay, let alone to any sort of classical notion of supply and demand.”

Because most Americans depend on their employer’s health insurer to deal with the bills, they have no idea what prices should be paid for treatments and hospital stays.  “…consumers of private insurance don’t buy it directly, but instead receive it through their employers, making them less sensitive to its price.  Workers want access to the top hospitals and get upset when their plan denies that access, because they don’t directly see” the cost-savings of a cheaper hospital.

“Most hospitals are ‘nonprofit’ entities for tax purposes, which gives the public the impression that hospitals focus on healing the sick instead of making.  But that’s not true.  ‘Nonprofit’ status simply prevents hospitals from distributing earnings to owners or shareholders; it does not prevent them from paying large salaries to their executives and piling up cash for their project,” Roy says.

The tactic hospitals have used to gain leverage over private insurers is consolidation. 

 “In most sectors of the economy,” Roy notes, “the government uses antitrust laws to prevent the formation of monopolies.  But federal agencies and courts have been uniquely passive in the face of hospital monopolies.”

Referring to a market concentration measuring tool called the Herfindahl-Hirschman Index (HHI), Roy says, “The HHI is calculated by taking all the players in a given market, calculating their market shares, squaring each market-share percentage, and adding up the total.”

By this statistical math, which we won’t even attempt to decipher here, a perfect monopoly would have an HHI of 10,000. 

“According to guidelines published by the U.S. Department of Justice [why are they involved in this?] and the Federal Trade Commission, a market with an HHI between 1,500 and 2,500 is considered moderately concentrated; one with an HHI above 2,500 is considered ‘highly concentrated’ and subject to regulatory scrutiny.”

In 1992, hospital markets in the U.S. had an average HHI of 2,400.  Nearly half of all localities in America already had a highly-concentrated hospital market.  Based on antitrust guidelines for the rest of the economy, the U.S. ought to have blocked the vast majority of hospital mergers that took place thereafter.

“Instead, however, the DOJ and the FTC challenged only a handful of deals.  The agencies determined that they would bother to address hospital mergers only if those mergers drove to HHI to near 5,000.  Hospitals, defending theirs against the government’s opposition, played up their traditional image to sympathetic judges:  as instruments of charity, as nonprofit ‘pillars of their communities.’

“The tactic worked.  From 1993 to 2008, the DOJ and the FTC failed to block a single hospital merger in the United States,” Roy tells us.  “By 2006, the average hospital market HHI increased from 2,440 to 3261.  Hospital monopolies and oligopolies use their market power just as other monopolies do:  to raise prices.  James Robinson of the University of California found that hospitals in markets with above-average HHI scores – the highly-consolidated ones – charged 44 percent more than [hospitals] in markets with below-average HHI scores.  And nearly all of that extra revenue from higher prices went straight to hospitals’ bottom lines, where it could be used to pay higher salaries, build new wings, and swallow up smaller competitors.”

Roy goes on to explain:  “Hospitals aren’t just buying up rival hospitals.  They’re also acquiring physicians in private practice.  According to an analysis by Aetna in 2002, two-thirds of medical practices were owned by physicians, compared with one-quarter by hospitals.  By 2011, these numbers had reversed.

“Hospitals acquire private practices because it lets them control the patients whom private physicians see.  Independent physicians can refer their patients to any hospital that accepts their insurance;  hospital-affiliated doctors are required to refer patients to the hospitals they work for.

“Hospital-affiliated physicians, in turn, can take advantage of hospitals’ market leverage to charge higher prices to patients with private insurance, an important counterbalance (for them) to the increasing number of people on government-sponsored health insurance, which pays much less.

“Rather than address this problem, Obamacare, at the hospital lobby’s behest, actively suppresses the ability of physicians to compete with hospitals.  Section 6001 of the Affordable Care Act bars the construction of new physician-owned hospitals if those hospitals will accept Medicare patients.  Physicians are trying to persuade Congress to reverse the ban.  But that effort ‘faces an uphill battle with Democrats, [according to WSJ’s Alicia Mundy] because the ban was a crucial tool they used to gain the hospital industry’s support [for Obamacare] in the first place.”

“It [should not] surprise you that the American Hospital Association eagerly supported Obamacare; hospitals will be the single biggest beneficiary of trillions in new spending that the law will authorize.  Currently, approximately one-third of government health spending ends up in the pockets of hospitals.  This year, before the implementation of Obamacare, U.S.-government entities will send $500 billion to American hospitals, a figure that the Centers for Medicare and Medicaid Services expects to grow to $800 billion a year by 2021.  And the more money hospitals get, the more powerful they become, giving politicians even greater incentive to cater to their interests.”

Giving a history of socialized medicine, Roy explains that it all began with Lyndon Johnson’s Great Society, turning “American hospitals into a political and economic juggernaut.  Before the establishment of Medicare and Medicaid in 1965, progressive efforts to pass single-payer health care had been stymied by two powerful forces:  conservative Southern Democrats (who resisted centralization in general and feared integration mandates) and the American Medical Association [which represented physicians, not hospitals].”

However, thanks to the re-election of Johnson in 1964, along with a boatload of Congressional Democrats, his social engineering agenda was destined to pass with or without the aid of the Dixiecrats.  A number of congressional conservatives threw up their hands and hopped on board the socialized medicine gravy train.  Sound familiar?

“Johnson,” says Roy, “recognizing the AMA’s pull, softened doctors’ resistance by assuring them that Medicare would contain no cost controls.  The Medicare bill promised to pay doctors and hospitals according to ‘usual, customer, and reasonable’ rates.  The result was that doctors and hospitals could charge whatever they wanted to.

“And they did, in the first year of Medicare’s existence, hospital spending increased by 22 percent.  For the next five years, hospital spending grew by an average of 14 percent a year.  In the decades since, growth in hospital spending has continued to exceed that of the rest of the economy.  In 1965, Congress projected that by 1990, accounting for inflation, the government would spend $12 billion on Medicare.  In actuality, the government spent $110 billion on Medicare that year, and another $74 billion on Medicaid.  Eight years from now, the Centers for Medicare and Medicaid Services projects U.S. public spending on health care will approach $2.4 trillion.  One-third of that, as noted above, will flow to hospitals.”

Presidents since Nixon have made attempts to rein in government health spending.  President Reagan introduced price controls in 1983 into Medicare.

“But,” Roy notes, “price controls only incentivized doctors to provide more kinds of services at a higher volume, to make up for lower prices.  And hospitals have responded to Medicare’s price controls by ‘cost-shifting’ – charging higher prices to people with private insurance, and astronomical prices to the uninsured.”

These two articles, with all-due apologies to the Wall Street Journal and the National Review (I’ll be mailing out the check for my subscription renewal today!), paint a grim but accurate picture for the average citizen of just what the heck is going on.  I share them because I had my own OMG!! reaction to the information in them. 

I always regarded myself as an average employee and used to apologize to my editor, JD.  But because I was “only” average, he found I was a most useful employee.  He would hand me an insurance article, and ask me to read it while I sat with him.  He would watch my face for any signs of confusion.  “Is there anything you don’t understand in that article?” he would ask.  If there was, I would tell him, and the article would undergo a revision until I could understand it.  If I could understand, that meant that the average company employee could understand it.

Obamacare is a deliberately complex, confusing, and complicated piece of bureaucracy, written precisely so the average American would not understand it.  What they don’t understand, they can’t oppose.  This is information they really, really need to know and so I’m sharing it with them, since the average American can’t afford the Wall Street Journal and hardly knows that a magazine called The National Review exists, much less reads it.

It’s time to pull back the privacy curtain surrounding hospitals.



Published in: on November 21, 2013 at 10:07 am  Comments (4)  

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  2. U.S. News shouldn’t be measuring reputation at all. It’s just a popularity contest. Most physicians don’t know much about the care delivered at local hospitals, let alone at those across the country, so surveyed physicians tend to rely on rankings. Response: The physician survey is a proxy for the process of care within a hospital — the quality of caregivers’ decisions and their execution at every point from admissions to diagnostics to treatment choices to medication management. Do doctors adhere to accepted guidelines? What protects patients from medication errors? Are handoffs accomplished with adequate communication and speed? Until good process data for thousands of hospitals are made available, the choice is to rely either on data that are selective, incomplete, noisy or error-prone (sometimes all four) or on a proxy. We believe that responsible specialists plug into extensive networks of other specialists in seeking the best care for the most challenging patients wherever it might be located. The late Bernadine Healy, a cardiologist and director of the National Institutes of Health before coming to U.S. News as health editor, used to call the physician survey a form of peer review.

  3. In its 2011 healthcare compensation survey, consulting firm Integrated Healthcare Strategies found that CEOs of independent hospitals averaged a base income of $482,300 per year, and $539,200 after bonuses. In independent healthcare systems, the average base salary was $687,900 and total compensation was $861,500. For comparison purposes, the survey also provided median salaries of $467,500 for hospital CEOs and $649,900 for health system CEOs. With bonuses, those totals increased to $496,400 and $790,100 respectively. A median is the point at which half of the respondents earn less, and half earn more. A broad gap between median and average indicates a few high earners skewing the group’s average upward.

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